Stamps.com 2013 Annual Report Download - page 57

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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Description of Business
Stamps.com Inc. and Subsidiary (“the Company” or “we”) are the leading provider of Internet-based postage solutions. Our customers use our
service to mail and ship a variety of mail pieces, including postcards, envelopes, flats and packages, using a wide range of United States Postal
Service (the “USPS”) mail classes, including First Class Mail®, Priority Mail®, Priority Mail Express®, Media Mail®, Parcel Select®, and
others. Customers using our service receive discounted postage rates compared to USPS retail rates on certain mail pieces such as First Class
letters and domestic and international Priority Mail and Priority Mail Express packages. Our customers include individuals, small businesses,
home offices, medium-size businesses and large enterprises, and within these segments we target both mailers and shippers. We were the first
ever USPS-licensed vendor to offer PC Postage® in a software-only business model in 1999.
2.
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Stamps.com Inc. and PhotoStamps Inc. In October 2009, we formed PhotoStamps
Inc., a wholly-owned subsidiary, for the purpose of managing our retail gift card operations. Because 100% of the voting control is held by us,
we have consolidated PhotoStamps Inc. in the accompanying consolidated financial statements. All significant intercompany accounts and
transactions have been eliminated.
Use of Estimates and Risk Management
The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes. Actual results could differ from those estimates, and such differences may be
material to the financial statements. Examples include estimates of loss contingencies, promotional coupon redemptions, the number of
PhotoStamps retail boxes that will not be redeemed, deferred income taxes and estimates regarding the useful lives of our building, patents and
other amortizable intangible assets.
Contingencies and Litigation
We are subject to various routine litigation matters as a claimant and as a defendant. We record any amounts recovered in these matters when
received. We record liabilities for claims against us when the loss is probable and estimable. Amounts recorded are based on reviews by outside
counsel, in-house counsel and management. Actual results could differ from estimates.
Cash Equivalents and Investments
We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash
equivalents.
Our cash equivalents and investments consisted of money market funds, U.S. government obligations, asset-backed securities and public
corporate debt securities at December 31, 2013 and 2012. All investments are classified as available for sale and are recorded at market value
using the specific identification method. Realized gains and losses are reflected in interest and other income, net while unrealized gains and
losses are included as a separate component of stockholders' equity.
F-7
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